The Reserve Requirement Is 4 Percent,banks Hold No Excess Reserves

question 95

Multiple Choice

The reserve requirement is 4 percent,banks hold no excess reserves and people hold no currency.If the Fed sells $10,000 worth of bonds,what happens to the money supply?

• A)it increases by $250,000
• B)it increases by $200,000
• C)it decreases by $200,000
• D)it decreases by $250,000

---

Definitions:

Cohesion

The degree to which members of a group or team are united in pursuing common goals and how well they stick together.

One-Dimensional

Lacking depth or complexity; containing only one aspect or dimension.

Affective

Relating to moods, feelings, and attitudes; the emotional aspect of consciousness as opposed to cognitive or behavioral aspects.

Instrumental

Serving as a means or tool to achieve a desired goal or end.